U.s. Losing Its Free-trade Edge

INTERNATIONAL

Tired Of Waiting, Latin American Countries Form Their Own Pact

When it comes to free trade in the Americas, the United States is like "a host who fails to show up to his own dinner party," says a Miami trade expert.

The guests from Latin America and the Caribbean organize themselves, have a great time, and then ask, "Who needs the host anyway?''

That's how University of Miami Inter-American specialist Jerry Haar described the trends in hemispheric free trade during a customs conference in Miami.

Participants agreed that Washington is stalled on expanding the North American Free Trade Agreement, and another regional bloc has instead captured the momentum: Mercosur, led by Brazil.

"NAFTA is stuck in the mud," Haar said. "Brazil has asserted its leadership role."

Mercosur started two years ago as a serious economic force, with more than 200 million people in Brazil, Argentina, Uruguay and Paraguay producing more than half the output in Latin America.

Its power grew last year when it signed a new associate member: Chile, the country that Washington had pledged as next for its now-stalled NAFTA expansion.

And Mercosur's weight stands to further grow as it prepares this year to join at least four more countries in what some call the South American Free Trade Agreement (SAFTA) - an apparent counterbalance to NAFTA.

"SAFTA," said Colombia's vice minister for trade Felipe Jaramillo, " will allow us to be in a stronger position to negotiate with other groups in the Americas."

For South Florida, the mix of U.S. footdragging and Mercosur's expansion could mean a loss of some business to Brazil.

That's because Mercosur cuts tariffs for trade among its members, but keeps tariffs higher on imports from non-members, including the United States.

Rather than shipping U.S.-made goods from Florida with higher tariffs, some U.S. firms might seek to produce in Brazil and sell with lower tariffs into Mercosur, trade experts said.

"U.S. firms could find themselves on the wrong side" of Mercosur and other regional accords, until a hemispheric pact is crafted, warned Ambler Moss, director of the University of Miami's North-South Center, in a recent report on hemispheric trade.

Brazil's push stems partly from a 1994 summit in Miami, where President Clinton and leaders from 33 other hemispheric countries agreed to form a Free Trade Area of the Americas by 2005.

Clinton proposed the pact and pledged to move it forward by bringing Chile next into NAFTA, joining Canada and Mexico - a step still to take place.

Chile's entry into Mercosur was the clearest signal yet that Latin American countries will not wait for Congress to act first.

`With the Chile-Mercosur agreement, Mercosur ... increased its political weight as a counterbalance to NAFTA," the Summit of Americas Center of Florida International University wrote in a recent report on Chile.

So far, the United States has favored a comprehensive approach - with pacts on tariffs, labor, environment and other issues still being debated in Congress.

Brazil instead has favored a more limited approach - focusing mainly on tariffs.

"Mercosur is leading the way in what might be the blueprint for Latin America in trade, investment and integration," said Osvaldo Agatiello, the Latin American regional coordinator for consulting firm Baker & McKenzie in Miami.

Mercosur follows a European Community model, with Brazil and Argentina acting as cornerstones, much like Germany and France have in Europe.

The group officially began Jan. 1, 1995. It eventually aims to create a common market in South America's southern cone to include common trade policies, in addition to common tariffs now being implemented.

The group's efforts toward open trade already are paying off for its founding members.

Trade between the four countries reached $14.5 billion in 1995 - the last year with full data - up more than three-fold from 1990.

Brazil is South Florida's largest trading partner, with imports and exports last year estimated to top $4 billion.